January 21, 2022

Four Lessons In Lean Execution – Arrington XRP Capital


Moonbeam is the first Parachain on Polkadot to offer a fully EVM compatible platform for smart contracts. It is going live today and it is not going live in stealth.

The launch is unique and worth studying — it doesn’t resemble anything we have seen from a “new L1”, despite being born in the L1 epoch of 2020-21. 

Somehow, Moonbeam skipped the queue. The genesis ecosystem resembles mature peers who have spent years fighting for mindshare. They ducked out of the skirmish for zero-sum traction and built an arguably insurmountable ecosystem before the product went live.

This is how Moonbeam’s L1 strategy is fundamentally different. Most L1s play a sequential game: first build the technology, then attract the ecosystem. Moonbeam parallelized this effort. There are already over 80 projects building on the network before the L1 is live. Some of the most popular DeFi protocols on Ethereum. Cross-chain bridging protocols. Wallets that port millions of users. Staking providers, APIs, oracles. Esteemed degens stand in formation ready to integrate into Moonbeam — projects like Sushi, Frax and Synapse.

They ran a successful crowdloan in 2021 with over $1.1B worth of $DOT staked to the auction. They did a fair launch of a test network called Moonriver on Kusama, a network that has now spawned a life and community of its own.

It’s a tale of guerilla BizDev, illustrating that one does not need a giant war chest or head count to win. What’s even more impressive is the extent to which the team defied the odds.

Moonbeam is a new L1, so it came with all the risk of a new L1. Moonbeam is also one of the first Polkadot Parachains, so it also came with deep Polkadot risk. Moonbeam was not started by crypto-natives; the team faced a steep learning curve.

Not only does it appear that they overcame these risks and got to a successful launch, they may be the first L1 to launch with a mature ecosystem already in place.

In this blogpost, I’d like to explore Moonbeam’s story, firstly congratulating the team on their accomplishment (and thanking them for letting us invest).

Secondly, I believe that Moonbeam will stand out as one of the best examples of lean execution in 2020-21. The Moonbeam Strategy is a handbook for new crypto teams. It contains four important lessons. Each is more important by the day, as we enter a frothy environment that pressures entrepreneurs to view fundraising as the most important part of any new project.

(1) Curiosity as the highest good, how to become a crypto-native

We first met the Moonbeam team in late 2019 at an Algorand event in San Francisco. Their parent company, PureStake, was running Algorand nodes. They were not crypto-native. The main reason they were in crypto at all is because Derek Yoo, the founder of PureStake, had previously co-founded a company with Algorand’s CEO Steve Kokinos in 2006.

There was no Moonbeam at the time. Beyond the narrow infrastructure work they were doing for Algorand, they had very little grasp on crypto. They admitted this frankly. They chased us (and others) down and asked for meeting after meeting — they just wanted to talk about crypto. They asked a thousand questions. Every time we would point them to a new resource, they would come back with more questions.

They had an intense curiosity and a complete lack of arrogance. Derek was an incredibly accomplished Web2 founder. He had raised money from the best VCs, scaled to hundreds of people, sold software to the largest enterprises in the world. He had every reason to feel confident. He still came to crypto tabula rasa. He wasn’t afraid to admit that he knew little about this new space and was willing to spend months wandering the desert with no idea what he was going to build. He was also willing to remain undeterred in this discovery process, shielding himself and the team from the arrows of a cynical fundraising landscape.

This is where most accomplished Web2 teams fail. They come to crypto with too much baggage. They jump right in, thinking they know how to build a business and will likewise succeed in crypto. They apply Web2 mental models without first running discovery. Some of the most successful projects are crypto-native — their lack of background is an advantage. They aren’t blinded by the heuristics of the old world. The Moonbeam formula is a guide on synthesizing both: bring the skills of Web2 company-building, but adapt these skills to the degen playbook.

A discovery process is especially important for “old school” teams because they will likely land on the wrong idea without it. Derek converged on EVM compatibility on Polkadot in Q1 of 2020. At the time, the “multi-chain” narrative did not exist. EVM compatibility season didn’t emerge for another year — when BSC began its DeFi liftoff in January of 2021. The $DOT token didn’t exist. And yet — because of how seriously they took this initial research — Moonbeam landed on an excellent and early idea.

Moonbeam’s original pitch in January 2020, a year before the emergence of BSC DeFi.

Derek was one of the first founders in two emerging spaces: (1) Polkadot and its entrance into the multi-chain landscape, (2) EVM compatibility as a winning strategy. 

(2) Guerrilla BD, adapting enterprise BD to crypto

Having a real BD process is rare in crypto. Most technical founders don’t build a BD pipeline until long after their product is live. Rarely do protocols begin with a hunter at the helm. Rarely is there someone logging the CRM and chasing down flakey leads. The deeper we head into a feverish bull market, the worse this will become. There is increasingly less scrutiny placed on teams with lackluster follow up.

The Moonbeam began building this process very early on. For the first year, there was one dedicated team member leading the entire business development effort — Nate Hamilton. He would soon be joined by Fransisco Agosti. There was no VP of Sales. No Salesforce subscription. Just the one-two of a guerilla BD team and Derek. Recall what they were presenting: a new L1 which didn’t exist, EVM compatibility before multi-chain meant anything, on Polkadot, before the $DOT token was trading — in what felt like years before we’d know anything about Parachains.

And yet within months of their first raise, they saw a flood of traction. Projects signed up. DeFi behemoths like Sushi said yes. How? Why?

Very early on, they embedded themselves into the Polkadot community. They added as much value to Polkadot as they could. Before they were evangelizing Moonbeam, they were evangelizing Polkadot. This helped them win trust and relationships in what was an early Polkadot community. They quickly became “the guys”. Eventually, they were working side by side with the Parity team, collaborating to bring new teams into the Polkadot ecosystem.

The lesson here is: crypto BD does not always begin as a frontal assault. It is about finding leverage – a unique way to take advantage of manpower and branding somebody else has already built. Moonbeam could have started by trying to hammer down every DeFi protocol on Ethereum, but this would have required an army of cold-callers. Instead, they played their cards in Polkadot and the traction poured in as they became synonymous with Parity itself.

Secondly, start early. Some of the best technical teams overlook BD as an afterthought. They sequence technology and BD: first launch and then get people on board. This usually has the right intentions; promise only what we can deliver: The best teams promise early, and they make sure they deliver. 

(3) Stand on the shoulders of a giant or two

This next strategy feeds from the last. Moonbeam is a new L1, but is launching as a Parachain. The Parachains are new L1s, but don’t bootstrap their own security. They create application-specific L1s without building a blockchain from scratch. Polkadot’s Relay Chain is the “layer zero”, allowing each Parachain to share its security. The L1s can focus on their core competencies.

We wrote about this in our paper titled “The League of Parachains: Polkadot”:

“The L1s outsource security to the mothership: each nation receives the benefits of a standing army without needing to raise, maintain and deploy a standing army. The Parachains can thus redeploy resources otherwise spent on L1 security into their chain’s core competency. This shared security unlocks (1) Parachain customizability without sacrificing security and (2) built-in interoperability between different Parachains.”

This was critical to Moonbeam’s success. They reaped the rewards of Polkadot, which has spent over half a decade building its blockchain infrastructure, while honing in on the craft and UX of EVM-compatibility. When they pitched the Moonbeam L1, they were inherently pitching not just their engineering team, but Parity and the Polkadot L0.

Moonbeam’s technical strategy aligned with their business strategy. The reason they could begin building an ecosystem early on was because they weren’t trying to build everything themselves. They took a bet on the Parachain model, evangelizing Parity’s technical prowess as much as their own.

They took this strategy to the extreme: they stood on the shoulders of two giants, playing the delicate role of the diplomat in the middle. They also bet on the EVM. Moonbeam was presenting Polkadot to Ethereum projects and building Ethereum products on Polkadot.  

The lesson is here to find a way to create technical alignment between your project and a larger mothership or several motherships. If a new L1 like Moonbeam could do this, most dAPPs can find ways to do the same. In Polkadot, this dynamic is on steroids. It is part of the premise of being a Parachain and sharing security: you give up control over your L1’s security model, but in exchange you inherit immense leverage from the underlying ecosystem.

(4) Think like a bear market founder

We are in the hottest phase of crypto VC — perhaps ever. Growth funds are being raised every week. The floor for seed valuations is soaring. Diligence is loosening. Teams are growing confident in their destiny: certain success.

We have seen this movie before and the reality is that many of the “hot raises” of 2021-22 will fail. Moonbeam is illustrative because they did not raise their initial capital in a hot market. It was the Sahara era, the gruelling market of late 2019 and early 2020. 

The advantage of Moonbeam’s timing is they avoided the distractions of the VC bull market. They sharpened their strategy and did more homework, because they had to. There weren’t any unicorn FDVs floating around in the middle of 2020. Failure felt like destiny, not success. They weren’t showered with investor praise. Nor were they lured into today’s trap of thinking that raising money is the most critical part of a new project.

To date, Moonbeam has raised very little venture capital: $1.4m in the first round, following this up with a $6m raise six months later. Compared to today’s market, they were conservative. Compared to analogous L1s who have historically raised humongous warchests, they were very conservative. 

And yet they have quickly climbed the ranks of organic developer traction, with an ecosystem that stands toe-to-toe with peers even before the main product goes live.

The lesson here is that capital is not king. There are protocols where it makes sense to beef up the balance sheet. However, in most cases, a good strategy is worth way more than fundraising bravado.

Founders should “act as if” they are in a bear market. Despite Moonbeam’s continued success — encapsulated by the $1.1B crowdloan and Moonriver’s organic explosion — not much has changed. They operate the same way they did in early 2020. They ask questions, ask for help; they are quick to do what they promise. Maybe they got lucky — the distinct advantage of starting in a bear market. Born in the dark, moulded by it. 

Artificially replicating this mindset is not easy. But I think it will serve new teams well and increase their probability of success — beyond the inevitable washout of crypto’s new hot money. 

The Next Phase Of Moonbeam

Moonbeam is live. It is Polkadot’s entry into the cross-chain galaxy. It begins with an exploratory landing on the EVM. We are excited to watch the first wave of Ethereum protocols deploy onto Moonbeam. 

Moonbeam TVL will be an important signal for Polkadot traction. We are excited to see what the team has up its sleeve. How will they adapt their guerilla strategy now that the protocol is live?

Moonbeam could not only be a formidable competitor in the race for EVM compatible blockchains, it has the opportunity to expand into a portal for multi-chain applications. As the ecosystem goes live, we are excited to continue backing the Moonbeam team. If you are a developer building an application on top of Moonbeam, we want to meet you.





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